Provider executives already know America’s hospitals and health systems are seeing rapidly deteriorating finances as a result of the coronavirus pandemic. They’re just not yet sure of the extent of the damage.
By the end of June, COVID-19 will have delivered an estimated $200 billion blow to these institutions with the bulk of losses stemming from cancelled elective and nonelective surgeries, according to the American Hospital Association.
A recent Healthcare Financial Management Association (HFMA)/Guidehouse COVID-19 survey suggests these patient volumes will be slow to return, with half of provider executive respondents anticipating it will take through the end of the year or longer to return to pre-COVID levels. Moreover, one-in-three provider executives expect to close the year with revenues at 15 percent or more below pre-pandemic levels. One-in-five of them believe those decreases will soar to 30 percent or beyond.
Available cash is also in short supply. A Guidehouse analysis of 350 hospitals nationwide found that cash on hand is projected to drop by 50 days on average by the end of the year — a 26% plunge — assuming that hospitals must repay accelerated and/or advanced Medicare payments.
While the government is providing much needed aid, just 11% of the COVID survey respondents expect emergency funding to cover their COVID-related costs.
The figures illustrate how the virus has hurled American medicine into unparalleled volatility. No one knows how long patients will continue to avoid getting elective care, or how state restrictions and climbing unemployment will affect their decision making once they have the option.
All of which leaves one thing for certain: Healthcare’s delivery, operations, and competitive dynamics are poised to undergo a fundamental and likely sustained transformation.
Here are six changes coming sooner rather than later.
1. Payer-provider complexity on the rise; patients will struggle.
The pandemic has been a painful reminder that margins are driven by elective services. While insurers show strong earnings — with some offering rebates due to lower reimbursements — the same cannot be said for patients. As businesses struggle, insured patients will labor under higher deductibles, leaving them reluctant to embrace elective procedures. Such reluctance will be further exacerbated by the resurgence of case prevalence, government responses, reopening rollbacks, and inconsistencies in how the newly uninsured receive coverage.
Furthermore, the upholding of the hospital price transparency ruling will add additional scrutiny and significance for how services are priced and where providers are able to make positive margins. The end result: The payer-provider relationship is about to get even more complicated.
2. Best-in-class technology will be a necessity, not a luxury.
COVID has been a boon for telehealth and digital health usage and investments. Two-thirds of survey respondents anticipate using telehealth five times more than they did pre-pandemic. Yet, only one-third believe their organizations are fully equipped to handle the hike.
If healthcare is to meet the shift from in-person appointments to video, it will require rapid investment in things like speech recognition software, patient information pop-up screens, increased automation, and infrastructure to smooth workflows.
Historically, digital technology was viewed as a disruption that increased costs but didn’t always make life easier for providers. Now, caregiver technologies are focused on just that.
The new necessities of the digital world will require investments that are patient-centered and improve access and ease of use, all the while giving providers the platform to better engage, manage, and deliver quality care.
After all, the competition at the door already holds a distinct technological advantage.
3. The tech giants are coming.
Some of America’s biggest companies are indicating they believe they can offer more convenient, more affordable care than traditional payers and providers.
Begin with Amazon, which has launched clinics for its Seattle employees, created the PillPack online pharmacy, and is entering the insurance market with Haven Healthcare, a partnership that includes Berkshire Hathaway and JPMorgan Chase. Walmart, which already operates pharmacies and retail clinics, is now opening Walmart Health Centers, and just recently announced it is getting into the Medicare Advantage business.
Meanwhile, Walgreens has announced it is partnering with VillageMD to provide primary care within its stores.
The intent of these organizations clear: Large employees see real business opportunities, which represents new competition to the traditional provider models.
It isn’t just the magnitude of these companies that poses a threat. They also have much more experience in providing integrated, digitally advanced services.
4. Work locations changes mean construction cost reductions.
If there’s one thing COVID has taught American industry – and healthcare in particular – it’s the importance of being nimble.
Many back-office corporate functions have moved to a virtual environment as a result of the pandemic, leaving executives wondering whether they need as much real estate. According to the survey, just one-in-five executives expect to return to the same onsite work arrangements they had before the pandemic.
Not surprisingly, capital expenditures, including new and existing construction, leads the list of targets for cost reductions.
Such savings will be critical now that investment income can no longer be relied upon to sustain organizations — or even buy a little time. Though previous disruptions spawned only marginal change, the unprecedented nature of COVID will lead to some uncomfortable decisions, including the need for a quicker return on investments.
5. Consolidation is coming.
Consolidation can be interpreted as a negative concept, particularly as healthcare is mostly delivered at a local level. But the pandemic has only magnified the differences between the “resilients” and the “non-resilients.”
All will be focused on rebuilding patient volume, reducing expenses, and addressing new payment models within a tumultuous economy. Yet with near-term cash pressures and liquidity concerns varying by system, the winners and losers will quickly emerge. Those with at least a 6% to 8% operating margin to innovate with delivery and reimagine healthcare post-COVID will be the strongest. Those who face an eroding financial position and market share will struggle to stay independent..
6. Policy will get more thoughtful and data-driven.
The initial coronavirus outbreak and ensuing responses by both the private and public sectors created negative economic repercussions in an accelerated timeframe. A major component of that response was the mandated suspension of elective procedures.
While essential, the impact on states’ economies, people’s health, and the employment market have been severe. For example, many states are currently facing inverse financial pressures with the combination of reductions in tax revenue and the expansion of Medicaid due to increases in unemployment. What’s more, providers will be subject to the ongoing reckonings of outbreak volatility, underscoring the importance of agile policy that engages stakeholders at all levels.
As states have implemented reopening plans, public leaders agree that alternative responses must be developed. Policymakers are in search of more thoughtful, data-driven approaches, which will likely require coordination with health system leaders to develop flexible preparation plans that facilitate scalable responses. The coordination will be difficult, yet necessary to implement resource and operational responses that keeps healthcare open and functioning while managing various levels of COVID outbreaks, as well as future pandemics.
Healthcare has largely been insulated from previous economic disruptions, with capital spending more acutely affected than operations. But the COVID-19 pandemic will very likely be different. Through the pandemic, providers are facing a long-term decrease in commercial payment, coupled with a need to boost caregiver- and consumer-facing engagement, all during a significant economic downturn.
While situations may differ by market, it’s clear that the pre-pandemic status quo won’t work for most hospitals or health systems.
COVID-19 has led to a boom in telehealth, with some health care facilities seeing an increase in its use by as much as 8,000%.
This shift happened quickly and unexpectedly and has left many people asking whether telehealth is really as good as in-person care.
Over the last decade, I’ve studied telehealth as a Ph.D. researcher while using it as a registered nurse and advanced practice nurse. Telehealth is the use of phone, video, internet and technology to perform health care, and when done right, it can be just as effective as in-person health care. But as many patients and health care professionals switch to telehealth for the first time, there will inevitably be a learning curve as people adapt to this new system.
So how does a patient or a provider make sure they are using telehealth in the right way? That is a question of the technology available, the patient’s medical situation and the risks of going – or not going – to a health care office.
There are three main types of telehealth: synchronous, asynchronous and remote monitoring. Knowing when to use each one – and having the right technology on hand – is critical to using telehealth wisely.
Synchronous telehealth is a live, two-way interaction, usually over video or phone. Health care providers generally prefer video conferencing over phone calls because aside from tasks that require physical touch, nearly anything that can be done in person can be done over video. But some things, like the taking of blood samples, for example, simply cannot be done over video.
Many of the limitations of video conferencing can be overcome with the second telehealth approach, remote patient monitoring. Patients can use devices at home to get objective data that is automatically uploaded to health care providers. Devices exist to measure blood pressure, temperature, heart rhythms and many other aspects of health. These devices are great for getting reliable data that can show trends over time. Researchers have shown that remote monitoring approaches are as effective as – and in some cases better than – in-person care for many chronic conditions.
Some remaining gaps can be filled with the third type, asynchronous telehealth. Patients and providers can use the internet to answer questions, describe symptoms, refill prescription refills, make appointments and for other general communication.
Unfortunately, not every provider or patient has the technology or the experience to use live video conferencing or remote monitoring equipment. But even having all the available telehealth technology does not mean that telehealth can solve every problem.
Generally, telehealth is right for patients who have ongoing conditions or who need an initial evaluation of a sudden illness.
Because telehealth makes it easier to have have frequent check-ins compared to in-person care, managing ongoing care for chronic illnesses like diabetes, heart disease and lung disease can be as safe as or better than in-person care.
Research has shown that it can also be used effectively to diagnose and even treat new and short-term health issues as well. The tricky part is knowing which situations can be dealt with remotely.
Imagine you took a fall and want to get medical advice to make sure you didn’t break your arm. If you were to go to a hospital or clinic, almost always, the first health care professional you’d see is a primary care generalist, like me. That person will, if possible, diagnose the problem and give you basic medical advice: “You’ve got a large bruise, but nothing appears to be broken. Just rest, put some ice on it and take a pain reliever.” If I look at your arm and think you need more involved care, I would recommend the next steps you should take: “Your arm looks like it might be fractured. Let’s order you an X-ray.”
This first interaction can easily be done from home using telehealth. If a patient needs further care, they would simply leave home to get it after meeting with me via video. If they don’t need further care, then telehealth just saved a lot of time and hassle for the patient.
Research has shown that using telehealth for things like minor injuries, stomach pains and nausea provides the same level of care as in-person medicine and reduces unnecessary ambulance rides and hospital visits.
Some research has shown that telehealth is not as effective as in-person care at diagnosing the causes of sore throats and respiratory infections. Especially now during the coronavirus pandemic, in-person care might be necessary if you are having respiratory issues.
And finally, for obviously life-threatening situations like severe bleeding, chest pain or shortness of breath, patients should still go to hospitals and emergency rooms.
With the right technology and in the right situations, telehealth is an incredibly effective tool. But the question of when to use telehealth must also take into account the risk and burden of getting care.
COVID-19 increases the risks of in-person care, so while you should obviously still go to a hospital if you think you may be having a heart attack, right now, it might be better to have a telehealth consultation about acne – even if you might prefer an in-person appointment.
Burden is another thing to consider. Time off work, travel, wait times and the many other inconveniences that go along with an in-person visit aren’t necessary simply to get refills for ongoing medication. But, if a provider needs to draw a patient’s blood to monitor the safety or effectiveness of a prescription medicine, the burden of an in-person visit to the lab is likely worth the increased risk.
Of course, not all health care can be done by telehealth, but a lot can, and research shows that in many cases, it’s just as good as in-person care. As the pandemic continues and other problems need addressing, think about the right telehealth fit for you, and talk to your health care team about the services offered, your risks and your preferences. You might find that that there are far fewer waiting rooms in your future.
One component of Blockbuster’s financial model was the late fees it charged to customers who did not return a video tape to the store in time. These fees accounted for up to 16% of its revenue. In 1997, Reed Hastings was one of the customers affected by these fees. After one late rental, he was charged a hefty $40 late fee. His frustration inspired him to help create a company that would have no late charges. This new company also had the audacious idea to send DVDs straight to the customer’s home for a flat monthly fee. The company that Reed Hastings co-founded was Netflix.
Over time, Netflix changed and adapted with new technology and shifting consumer preferences. It moved on from mailing DVDs to using a streaming platform. It developed an algorithm to help make personalized video recommendations to Netflix users. It started producing its own video content. Over time, the company planted itself firmly within many homes and routines. Conversely, Blockbuster adapted to new platforms too slowly and too late. After its peak in 2004, Blockbuster started losing market share and relevance. Today, there is only one Blockbuster store left, a curious tourist attraction in Bend, Oregon.
Markets and industries change all the time. Distinguishing these important changes from temporary fads is essential. History has many examples of companies and organizations that did not sense important changes, did not change their approach, and as a result, ended up obsolete and irrelevant. A similar shift is happening today in healthcare, but there is more at stake than a late fee. Like Netflix, the healthcare industry needs to shift and adapt to consumer preferences.
The COVID-19 pandemic has had an immediate impact on the health of our country and has also indelibly changed how patients interact with the healthcare system. Hospitals and providers around the country have had to quickly develop new strategies to connect with patients – to comply with social distancing guidelines, in an effort to slow down the spread of the virus. Consistent communication and accessibility is vital, especially given the disturbing trends in decreased preventive care visits and delayed emergency care. One solution is telehealth.
During this pandemic, we have seen that remote patient monitoring is valuable for patients with a wide variety of needs: certainly, those quarantined with coronavirus, but for healthy patients too – children in need of regularly scheduled well-child visits and adults who need routine care. Many patients have experienced telehealth for the first time and many have positive impressions, with nearly three quarters of patients who had a recent telehealth visit describing it as good or very good, according to a recent survey.
Even after the COVID-19 pandemic settles, these “temporary” approaches will permanently change patient attitudes towards technology and force healthcare providers to reexamine their approach to care. Telehealth will remain a convenient option and, in some cases, a necessary way to receive care. Embedding telehealth into standard practice of care enables providers to expand the access to people who otherwise might forgo care, and to people who may face barriers getting to a clinic, for example patients with inflexible job schedules or limited transportation.
Patients and providers are not the only people recognizing the benefits; government officials are too. While reimbursement rules were temporarily expanded to include telehealth, some states, such as Colorado and Idaho, are making COVID-19 telehealth expansions permanent.
There are many parallels to borrow from the Blockbuster example. As healthcare providers, we cannot be complacent and stick with old business models because they are what we are used to. We cannot wait for people to come to us. We cannot ignore these changing times and consumers’ changing preferences. In fact, if we adapt and provide care in ways that patients prefer, we could improve health outcomes.
The healthcare institutions that will grow and be successful during this time are those who are more like Netflix. Instead of waiting for patients to decide to seek healthcare when it may be too late (e.g., just like a Blockbuster “late fee”), we will actively reach out and remind our patients about the importance of timely healthcare services. Instead of ignoring changes in patient preferences and new technology, we will adapt quickly to new platforms for healthcare visits. Instead of waiting for patients to feel comfortable to return to a healthcare facility, we will show patients what our healthcare system is doing to ensure patient safety and protection from COVID-19. Most importantly, instead of being complacent, we will accept and develop new ways of providing care.
There was once a time that we thought that getting in a car, driving to a strip mall, and walking through aisles with thousands of video tapes was the only option to watch a movie at home. Now, many of us can get thousands of titles on our televisions, computers, and phones through several movie streaming platforms. The COVID-19 pandemic has forced healthcare systems to quickly adapt to new constraints; however, it may really be an opportunity to develop new models of care, to engage with our patients, and to make healthcare more accessible. As healthcare providers, we need to make the choice to be more like Netflix, and less like Blockbuster.
In a recent discussion on consumer strategy, a health system executive relayed a surprising data point: the system’s most “digitally activated” market was a local retirement community. The residents of this over-55, master-planned community, designed for active seniors, had the system’s highest rates of patient portal activation and online appointment scheduling.
Growth of this cohort of “young old” consumers (YOLDS) —over 65 but still active—will explode as the peak of the Baby Boom joins their ranks. And with a median wealth of $210,000, they’ll have tremendous spending power, so much so that the Economist recently dubbed the next ten years “The Decade of the Yold”. Many “Yolds” will keep working well into their 70s, and those that do will experience slower rates of health and cognitive decline.
For health systems, the next few years are critical for deepening relationships as the Yolds transition into Medicare. What do they want today? Technology-enabled care, and access and communication that works right out of the box, as they have little patience for troubleshooting buggy software. Customized, high-touch services, like they’ve come to expect from everything they consume.
And a focus on helping them maintain their active, productive lifestyle for as long as possible. But they’re not brand switchers: once they join a Medicare Advantage plan, there’s a 90 percent chance they’ll stay. Building loyalty with the Yolds can be the found
The healthcare system is not meeting the needs of the people who need it most, according to a new focus group study.
Based on nine focus groups of low-income consumers with complex health and social needs, “In Their Words: Consumers’ Vision for a Person-Centered Primary Care System,” from the Center for Consumer Engagement In Health Innovation (the Center) at Community Catalyst, also reported:
Poll participants reported:
• The primary care system is not meeting the needs of the people who need it most because they do not have the ability to form meaningful primary care relationships and the system does not address the impact that problems like transportation, housing insecurity, mental health issues, and more have on their overall health. “Consumers expressed the desire for a primary care relationship that is not necessarily tied to a credential [e.g., an MD], but rather one that is rooted in empathy for the significant challenges and barriers this population faces in their day to day life,” says Ann Hwang, MD, director of the Center for Consumer Engagement in Health Innovation, a national, non-profit consumer health advocacy organization based in Boston. “These consumers don’t feel that doctors have the time to listen to them, that their stuck on a profit-driven treadmill, regardless of if the institution is for- or not-for-profit.”
• Unhappiness at a system they see as profit-driven.
• Strong desire for supportive services they do not get now, such as:
“The healthcare system has been going through major changes that are too often designed without meaningful input from the very people it exists to serve,” Hwang says. “Because primary care is often the first point of entry for a consumer into the larger healthcare system, these focus groups were conducted to capture the perspective of consumers with complex health and social needs about what they need and want from their primary care relationship.”
This reflects the mission of the Center for Consumer Engagement in Health Innovation which is to bring the consumer experience to the forefront of health system transformation to deliver better care, better value, and better health for every community, particularly vulnerable and historically underserved populations, according to Hwang.
“The voices in this report belong to people with complex health and social needs—a group that tends to include some of the highest-need and highest-cost patients.,” she says. “As systems shift toward value-based payment and try to understand and address non-medical drivers of good health (i.e., social determinants of health), this kind of insight is critical to designing and delivering care that actually meets the needs of the people it serves.”
Based on the poll, there are five takeaways for healthcare executives, according to Hwang:
In a presentation to investors this week, retail pharmacy giant CVS Health announced plans to expand its “HealthHUB” store concept, first launched at three store locations in Houston, to 1,500 stores in the next three years.
The new store concept, built to take advantage of CVS’s 2018 acquisition of health insurer Aetna, is centered around providing more extensive care management and wellness services than traditionally available at the chain’s Minute Clinics. In addition to Houston, the company is targeting Atlanta, Philadelphia, and Tampa, all in states where Aetna’s existing insurance footprint and the new care offerings can be combined to create new benefit designs and consumer engagement approaches.
In a wide-ranging discussion of the company’s future strategies, CVS executives also outlined plans for delivering home-based dialysis, expanded in-store primary care services, and further expansion of virtual care. In sum, CVS is banking on its ability to lower care costs for health plan enrollees and increase use of its clinic services to grow incremental revenue by $850M in the next three years, and $2.5B longer term.
We continue to view CVS as an entirely new kind of healthcare delivery company, bringing together convenient, lower-acuity care services and a risk model that will allow it to prosper by reducing the cost of care and building consumer loyalty. The speed of CVS’s rollout of this new value proposition should be a wake-up call to traditional healthcare providers everywhere.